Grayscale’s ETF Push: Court Challenges SEC’s Decision
A federal appeals court has directed the Securities and Exchange Commission (SEC) to reconsider Grayscale’s proposal to convert its bitcoin trust into an exchange-traded fund (ETF). The decision challenges the SEC’s historical reluctance to allow listed investments in Bitcoin’s spot market while permitting them for futures.
Judge Neomi Rao’s opinion criticized the SEC’s inconsistent treatment of similar products as “arbitrary and capricious,” noting that the denial lacked clear justification.
The SEC failed to demonstrate why Grayscale’s bitcoin ETF application differed significantly from approved futures-based funds, weakening their stance by not proving the spot market was riskier for investors. Grayscale’s spokesperson, Jennifer Rosenthal, praised the decision as a significant step for investors and the Bitcoin ecosystem.
The court acknowledged the SEC’s history of rejecting Bitcoin investment products but recent ETF applications from BlackRock, Fidelity, and others suggested a changing landscape.
We covered BlackRock’s application here.
Fidelity’s application is detailed here.
Grayscale submitted its ETF application in October 2021, which the SEC rejected for lack of safeguards against market manipulation. Grayscale appealed, leading to the recent court ruling.
As of now, the SEC has not issued an official statement, but reports suggest a thorough examination of the case. Grayscale’s win could pave the way for future endorsements, increasing scrutiny on the SEC’s rationale for rejecting spot Bitcoin ETF proposals.
Alex Adelman, CEO of Lolli, sees the decision increasing scrutiny on the SEC and views the BTC price surge as a vote of confidence in Bitcoin spot market investment tools:
“Now is the time for the U.S. to embrace innovation by making bitcoin available to investors through exchange-based products or risk falling behind global powers that are moving faster to claim this advantage.”
The court decision doesn’t automatically approve Grayscale’s application; it mandates a renewed assessment by the SEC. Nevertheless, it’s considered positive news for the cryptocurrency market and Bitcoin enthusiasts.
